Correlation Between GM and Eagle Capital
Can any of the company-specific risk be diversified away by investing in both GM and Eagle Capital at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GM and Eagle Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Eagle Capital Appreciation, you can compare the effects of market volatilities on GM and Eagle Capital and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GM with a short position of Eagle Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Eagle Capital.
Diversification Opportunities for GM and Eagle Capital
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and Eagle is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Eagle Capital Appreciation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Capital Apprec and GM is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on General Motors are associated (or correlated) with Eagle Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Capital Apprec has no effect on the direction of GM i.e., GM and Eagle Capital go up and down completely randomly.
Pair Corralation between GM and Eagle Capital
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.77 times more return on investment than Eagle Capital. However, GM is 2.77 times more volatile than Eagle Capital Appreciation. It trades about 0.16 of its potential returns per unit of risk. Eagle Capital Appreciation is currently generating about 0.28 per unit of risk. If you would invest 5,096 in General Motors on September 2, 2024 and sell it today you would earn a total of 463.00 from holding General Motors or generate 9.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Eagle Capital Appreciation
Performance |
| Timeline |
| General Motors |
| Eagle Capital Apprec |
GM and Eagle Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Eagle Capital
The main advantage of trading using opposite GM and Eagle Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Eagle Capital can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Eagle Capital will offset losses from the drop in Eagle Capital's long position.The idea behind General Motors and Eagle Capital Appreciation pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Eagle Capital vs. Chartwell Short Duration | Eagle Capital vs. Carillon Chartwell Short | Eagle Capital vs. Chartwell Short Duration | Eagle Capital vs. Carillon Chartwell Short |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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